PEP Family Members and Close Associates: Who Counts and for How Long

Most accountants know to check whether a client is a politically exposed person (PEP). Fewer are sure what to do about the PEP's spouse, adult children, business partner or fellow board member. The rules do reach them, but the definitions differ between the global standard, UK law and US guidance, and so does the length of time the extra scrutiny lasts. This guide compares the three using the primary documents we could read, and flags what we could not confirm. It goes deeper than our general guide to politically exposed persons, and it builds on our guides to KYC and customer due diligence and ultimate beneficial ownership.

The global standard: FATF's 2013 guidance

The Financial Action Task Force (FATF), the global anti-money-laundering standard-setter, published guidance on PEPs (Recommendations 12 and 22) in June 2013. According to that guidance, family members are individuals related to a PEP by blood, or through marriage or a similar civil partnership. It gives parents, siblings, spouses or partners and children as examples, and notes that some cultures extend the circle to grandparents, cousins or clans. Close associates are individuals closely connected to a PEP socially or professionally. The examples include partners outside the family unit, prominent members of the same political party, civil organisation or union, and business partners, especially those who share beneficial ownership with the PEP or sit with them on a board.

The guidance takes a risk-based view of how far to go. It says risk depends on the link between the family member or associate and the PEP, that family members and close associates are treated as PEPs because of the potential for abuse, and that the treatment lasts for as long as the PEP's own status continues. Its example is a young child of a foreign PEP: not a PEP in their own right, but treated as one while the parent holds that status. The guidance also stresses that PEP status is preventive, not criminal, and that refusing a relationship solely because a customer is a PEP is inconsistent with Recommendation 12.

Foreign, domestic and international organisation PEPs

FATF distinguishes foreign PEPs from domestic PEPs and from people entrusted with a prominent function by an international organisation. For foreign PEPs it says enhanced due diligence always applies, including senior management approval, reasonable measures to establish source of wealth and source of funds, and enhanced ongoing monitoring. For domestic and international organisation PEPs, firms take reasonable measures to determine whether the customer is one, then assess the risk of the relationship: enhanced due diligence is not required where the risk is normal or low, but the same measures as for foreign PEPs apply where it is higher.

The UK position: regulation 35

Regulation 35 of the Money Laundering Regulations 2017, in the version in force from 17 December 2024, requires systems to determine whether a customer or its beneficial owner is a PEP, a family member or a known close associate, and requires a risk assessment and enhanced due diligence where they are. The UK definitions are narrower than FATF's examples:

• Family member: a spouse or civil partner; children and their spouses or civil partners; and parents. Siblings are not listed.
• Known close associate: an individual with joint beneficial ownership of a legal entity or arrangement, or other close business ties, with a PEP; or an individual with sole beneficial ownership of an entity or arrangement known to be set up for the PEP's benefit.
• Domestic PEP: a PEP entrusted with prominent public functions by the UK. When assessing a domestic PEP, or their family member or known close associate, the starting point is a lower risk level than for a non-domestic PEP, and if no enhanced risk factors are present, the enhanced due diligence required is less.

For a PEP relationship, the regulation requires senior management approval, adequate measures to establish source of wealth and source of funds, and enhanced ongoing monitoring. On how long it lasts, a former PEP remains subject to those measures for at least 12 months after leaving the prominent public function, or longer if the firm thinks that is appropriate for the risk. Once a PEP has left office, family members and known close associates no longer need those measures, regardless of the 12-month period. When deciding whether someone is a known close associate, the firm need only consider information it holds or credible publicly available information.

What the FCA found in 2024

The FCA's July 2024 multi-firm review of how firms treat PEPs looked at 15 firms in the retail banking sector, and the FCA said the sample was not representative. It found that seven of the 15 used a PEP or close associate definition wider than the FCA expected, including treating political party candidates and union representatives as close associates and using "distant family members" as standard practice. It also found declassification policies that did not comply with the regulations and guidance, including policies that never declassified former heads of state. This review concerned FCA-regulated firms rather than accountants, so treat it as a useful signal rather than a rule for your practice.

The US view: FinCEN's 2018 advisory

FinCEN's advisory FIN-2018-A003, dated 9 June 2018, warns about corrupt senior foreign political figures and their facilitators. It notes that facilitators may include relatives or close associates, that FATF recommends treating them as PEPs, and that FinCEN's regulations similarly cover them. Among its red flags are the use of third parties when it is not normal business practice or when it appears to shield a PEP's identity, the use of family members or close associates as legal owners, and declarations by PEPs that are inconsistent with public asset declarations or official salaries. The advisory says no single red flag necessarily indicates suspicious activity, and it gives instructions for suspicious activity reports, including a key term for the narrative.

Practical steps

These are our suggestions, not official guidance. Ask about PEP connections at onboarding and map them against your ownership chart, because the UK test turns on beneficial ownership and business ties as much as on family. Apply the definition that governs your supervisor and jurisdiction, and record when you chose a wider reading and why. Note the date a PEP leaves office and set a review date for the 12-month point. Do not treat every connection as high risk: both FATF and the FCA review warn against blanket approaches.

What we could not confirm

• We did not read the FCA's guidance FG17/6 or the guidance accountants rely on from HMRC and the CCAB, which may add detail on family members and associates.
• We did not review Irish, EU or US statutory definitions. The Irish law is different from the UK, and the US advisory is guidance rather than a definition.
• The version of regulation 35 we read carried a note of a 2026 amendment to other parts of the regulations, in force from 1 February 2027, and we did not check whether it affects PEP duties.
• The FinCEN advisory is from 2018, and we did not check whether FinCEN has issued more recent guidance.

Frequently asked questions

Is a PEP's sibling a family member under UK law?

Not under the list in regulation 35(12), which names spouses or civil partners, children and their spouses or civil partners, and parents. FATF's guidance lists siblings as an example, so apply your own risk assessment.

Do the extra checks end when the PEP leaves office?

Under regulation 35, family members and known close associates no longer need the enhanced measures once the PEP has left office, while the PEP stays in scope for at least 12 months.

Where can I find more on compliance training?

See our CPD courses for accountants and finance professionals.